April 30, 2024/Cordros Report

OKOMU Oil Palm Plc (OKOMUOIL) published its Q1-24 unaudited results at market close yesterday (29 April). The company reported a PAT growth of 48.2% y/y to NGN15.08 billion (Q1-23: NGN10.18 billion), representing an EPS print of NGN15.81 (Q1-23: NGN10.67) owing to the strong revenue growth (+79.6% y/y) in the period.
 
Revenue grew by 79.6% y/y to NGN43.48 billion in Q1-24, primarily driven by solid growth in sales – local (+72.5% y/y | 90.3% of revenue) and export (+194.4% y/y | 9.7% of revenue). As witnessed in Q4-23, we cite that the higher sales print was driven by the effect of the local currency devaluation on Crude Palm Oil (CPO) prices, which triggered an increase in local CPO prices. Sequentially, revenue increased markedly by 203.2% q/q, most likely driven by higher volumes, given that H1 (Q1 and Q2) is typically the peak period for oil palm sales.
 
Gross margin contracted by 560bps to 76.3% in Q1-24 (Q1-23: 81.9%) due to a faster growth in cost of sales (+135.1% y/y) relative to revenue (+79.6% y/y). We suspect that currency devaluation must have caused a spike in plantation costs due to increased fertilizer costs amid pressure from higher energy prices.
 
Consequently, the EBIT margin declined by 542bps to 57.1% (Q1-23: 62.5%) even as Opex-to-sales ratio declined to 19.2% (Q1-23: 19.3%).
 
Net finance cost increased by 609.3% y/y to NGN1.79 billion (Q1-23: NGN252.77 million), following a 17.8x jump in finance costs to NGN4.51 billion, driven majorly by exchange losses in the period (NGN4.29 billion vs NGN7.29 million in Q1-23). Meanwhile, finance income came in at NGN2.72 billion (Q1-23: NGN1.16 million).
 
Overall, the company recorded a PBT growth of 54.8% y/y to NGN23.03 billion in Q1-24 (Q1-23: NGN14.88 billion). Following a tax expense of NGN7.95 billion, profit after tax grew by 48.2% y/y to NGN15.08 billion (Q1-23: NGN10.18 billion).
 
Comment: OKOMUOIL’s numbers for the quarter aligned with our expectations, given the impact of currency devaluation on CPO prices. Although we believe margins will remain pressured till at least HY, considering the effects of the higher energy and plantation costs, we still expect impressive topline growth to continue to shore up the company’s earnings in 2024FY. Our estimates are under review.